Correlation Between Provident Financial and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Provident Financial and Selective Insurance at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Provident Financial and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Services and Selective Insurance Group, you can compare the effects of market volatilities on Provident Financial and Selective Insurance and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Provident Financial with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and Selective Insurance.
Diversification Opportunities for Provident Financial and Selective Insurance
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Provident and Selective is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Provident Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Provident Financial Services are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Provident Financial i.e., Provident Financial and Selective Insurance go up and down completely randomly.
Pair Corralation between Provident Financial and Selective Insurance
Assuming the 90 days horizon Provident Financial Services is expected to generate 1.24 times more return on investment than Selective Insurance. However, Provident Financial is 1.24 times more volatile than Selective Insurance Group. It trades about 0.05 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.01 per unit of risk. If you would invest 1,542 in Provident Financial Services on September 12, 2024 and sell it today you would earn a total of 418.00 from holding Provident Financial Services or generate 27.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Provident Financial Services vs. Selective Insurance Group
Performance |
| Timeline |
| Provident Financial |
| Selective Insurance |
Provident Financial and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Financial and Selective Insurance
The main advantage of trading using opposite Provident Financial and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial position performs unexpectedly, Selective Insurance can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Provident Financial vs. BW OFFSHORE LTD | Provident Financial vs. Zijin Mining Group | Provident Financial vs. BOSTON BEER A | Provident Financial vs. THAI BEVERAGE |
| Selective Insurance vs. QBE Insurance Group | Selective Insurance vs. Insurance Australia Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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